Industry Name - Engineering & Construction Quarterly Update | Q1 2022 - MNP
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Engineering & Construction
Quarterly Update | Q1 2022
[Industry Name]
MNPCF.ca
Industry Overview
M&A Transactions & Performance
NORTH AMERICAN ENGINEERING & CONSTRUCTION M&A ACTIVITY
2.5 25
2.2
Transaction Volume (Number of Deals)
2.0 20
Transaction Value ($ Billions)
1.6
1.5 1.4 1.4 15
1.3
1.0 0.9 0.9 0.9 10
0.9
0.5 0.5 0.6
0.5 0.4 5
0.3 0.4
0.2
- -
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Canadian Transaction Value US Transaction Value
Canadian Transaction Volume US Transaction Volume
Source: Capital IQ. Data as of March 31, 2022.
Above noted mid-market M&A activity includes disclosed transactions not exceeding a total transaction value of $500 million. All figures are in CAD.
Transaction value is only inclusive of total transaction values which have been disclosed within Capital IQ.
Q1 Transactions (Canada) Q1 Transaction Value (Canada) Q1 Transaction Value (US) Q1 Transactions (US)
1 $145 million $1.2 billion 11
(-45% vs. Q4 2021) (+434.5% vs. Q4 2021) (-10.7% vs. Q4 2021) (-50% vs. Q4 2021)
Engineering and construction merger and acquisition (M&A) activity in Q1 2022 exceeded $1.2 billion in disclosed
transaction value across 12 deals in Canada and the US. US transactions accounted for 11 of these deals,
representing the largest quarterly volume in the past four years. The largest transaction in the quarter was US
based, and involved CalPortland Company’s acquisition of certain West Coast cement and ready mixed concrete
operations of Martin Marietta Materials, Inc. for $317 million. In the last 12 months, the majority of acquirers have
been strategic. Strategic acquisitions continue to drive industry activity, as participants target expansion into new
markets and mitigating skilled labour shortages.
Private Equity Deal Multiples PE Sponsored Multiples
10.0x (Engineering Services) 8.0x (Heavy & Civil Construction) 7.1x
7.9x 6.5x
8.0x 6.0x 5.3x
4.9x
EV / EBITDA
EV / EBITDA
6.0x 5.1x 5.1x
4.0x
4.0x
2.0x
2.0x
0.0x 0.0x
10 - 25 25 - 50 50 - 250 10 - 25 25 - 50 50 - 100 50 - 250
Total Enterprise Value Range ($ millions) Total Enterprise Value Range ($ millions)
Source: GF Data. Data as of April 2022. Page 2
Select Recent M&A Transactions
• Brookfield Renewable Corporation owns and
Closed Feb. 7, 2022 operates a portfolio of renewable energy power
generating facilities primarily in the US, Europe,
EV $819.1 million Colombia, and Brazil.
Acquired • Urban Grid Solar develops and operates utility-scale
EV/EBITDA N/A solar and renewable energy projects.
• The acquisition will allow Brookfield Renewable
Location Toronto, ON Corporation to strengthen its renewable energy
(Vendor)
service offerings.
• Orion Energy Systems, Inc. researches, designs,
develops, manufactures, markets, sells, installs, and
Closed Jan. 1, 2022 implements energy management systems for
commercial office and retail, exterior area lighting,
Acquired EV $5.6 million and industrial applications in North America.
• Stay-Lite Lighting Inc. provides interior/exterior
EV/Revenue 0.5x lighting maintenance and electrical services to
industrial, commercial, and retail businesses in the
Location Manitowoc, United States.
(Vendor) WI
• The acquisition allows Orion Energy Systems to
expand their service capabilities to a larger customer
base.
• MYR Group Construction Canada, Ltd. constructs
Closed Jan. 4, 2022 electrical transmission, substation, and distribution
systems for electric utilities and government agencies.
Acquired EV $145.4 million • Powerline Plus Ltd. offers engineering, procurement,
and construction services to utility companies.
EV/EBITDA N/A • The acquisition will allow MYR Group Construction
Canada Ltd. to strengthen its market share, while
Location Henderson, being able to expand its service offerings
(Vendor) CO simultaneously.
• Johns Lyng Group Limited provides integrated
building services in Australia and internationally.
Closed Jan. 1, 2022 systems for electric utilities and government agencies.
• Reconstruction Experts Inc., is a general contracting
EV $254.3 million company that provides reconstruction, restoration,
Acquired renovation, and remodeling services for residential,
EV/EBITDA 7.8x commercial, and industrial properties in Colorado,
California, Texas, Arizona, Nevada, and Wyoming.
Location Australia • The acquisition will allow Johns Lyng Group Limited
(Vendor)
to expand their service offerings in existing and new
geographic markets.
Source: Capital IQ.
All figures are in CAD. Page 3
Industry Overview
Engineering Services in Canada
The Engineering Services industry applies the physical laws and principles of engineering in the design,
development and use of machines, materials, instruments, structures, processes, and systems.
Products and Services
Industry Glance
Segmentation (2022)
2022 Revenue
$35.7B 13%
30%
Annual Growth 2017 – 2022 8%
2.1%
Projected Annual Growth 2022 – 2027 23%
2.1% 25%
Number of Businesses in 2022 Advisory Services
28,020 Energy and Mining
Residential and Commercial
Power Generation
Transportation
Heavy Engineering Construction in Canada
Heavy Engineering Construction performs new construction, reconstruction, rehabilitation, and repairs.
Industry Glance Products and Services
Segmentation (2021)
2021 Revenue
$53.9B 9%
9%
Annual Growth 2016 – 2021 36%
1.8% 14%
Projected Annual Growth 2021 – 2026
2.5%
19% 14%
Number of Businesses in 2021
2,742
Electric Power Land Transportation
Repair and Maintenance Mining Engineering
Marine and Waterworks Other
Source: IBISWorld Industry Report 54133CA Engineering Services in Canada March 2022.
Source: IBISWorld Industry Report 23799CA Heavy Engineering Construction in Canada. December 2021. Page 4
Macroeconomic Indicators
Key external drivers that affect the Engineering & Construction industry in Canada include the value of non-
residential construction (expenditures on office buildings, hospitals, factories, power plants, mining shafts,
communication lines, farms, railroads, and schools), aggregate private investment (investment in gross fixed capital
formation and inventories), government expenditure and investment (the total value of services produced by
federal, provincial, and local governments as well as investment in fixed assets), and the interbank overnight
lending rate in Canada.
Canada’s major cities such as Toronto experienced another quarter of acceleration in house prices. Supply was
scarce in the winter months compared to demand, which resulted in multiple bidding wars driving up prices.
However, there may be some easement on housing price acceleration due to a combination of interest rate
increases and new policies. In March 2022, the Bank of Canada increased interest rates by 0.25%, followed by
another 0.5% increase subsequent to Q1 in April 2022. In addition, the Federal Government is proposing new
measures to improve affordability such as a temporary ban for purchasing homes on individuals and companies
who are not Canadian residents. Lastly, inflation reached a high of 6.7%, putting downward pressure on Canadian’s
budgets and ability to purchase a home.
VALUE OF NON-RESIDENTIAL VALUE OF RESIDENTIAL CONSTRUCTION -
CONSTRUCTION - CANADA CANADA
200 200
175
150 150
$CAD Billions
$CAD Billions
125
100 100
75
50 50
25
- -
Historical Forecast Historical Forecast
GOVERNMENT EXPENDITURE AND INVESTMENT AGGREGATE PRIVATE INVESTMENT -
- CANADA CANADA
600 475
575 450
550
525 425
$CAD Billions
400
$CAD Billions
500
475 375
450
350
425
400 325
375 300
350 275
325
300 250
Historical Forecast Historical Forecast
Source: IBISWorld Business Environment Reports.
“F” indicates forecast. “CAGR” indicates compound annual growth rates. Page 5
Public Comparable Analysis
Growth, Margins & Multiples
LTM REVENUE GROWTH NTM REVENUE GROWTH
Heavy Civil 10% AVG: 11.0% Heavy Civil 4% AVG: 8.7%
Engineering 4% Engineering 6%
Construction Engineering 16% Construction Engineering 9%
Aggregate Supplier 14% Aggregate Supplier 15%
0% 5% 10% 15% 20% 0% 5% 10% 15% 20%
LTM EBITDA MARGIN NTM EBITDA MARGIN
Heavy Civil 9% Heavy Civil 7%
AVG: 15.7% AVG: 13.2%
Engineering 11% Engineering 10%
Construction Engineering 14% Construction Engineering 10%
Aggregate Supplier 29% Aggregate Supplier 27%
0% 10% 20% 30% 40% 0% 5% 10% 15% 20% 25% 30%
LTM EV/EBITDA NTM EV/EBITDA
Heavy Civil 6.9x Heavy Civil 6.0x
AVG: 10.9x AVG: 10.2x
Engineering 13.9x Engineering 13.3x
Construction Engineering 8.9x Construction Engineering 8.9x
Aggregate Supplier 14.0x Aggregate Supplier 12.7x
0.0x 5.0x 10.0x 15.0x 0.0x 5.0x 10.0x 15.0x
Source: Capital IQ. Data as of March 31, 2022.
Valuation details provided on page 8.
“LTM” refers to last twelve months. “NTM” refers to next twelve months. Page 6
Public Comparable Analysis
Performance Analysis
Engineering and Construction Peer Group
Share Price Performance – Q1 2022
7.08%
-7.63%
-10.08%
-13.75%
Share Price Performance – LTM
22.85%
10.70%
5.21%
-8.25%
Historical LTM EV/EBITDA – LTM
16.05x
10.02x
9.11x
6.87x
Source: Capital IQ. Data as of March 31, 2022.
Further details provided on page 8.
“LTM” refers to last twelve months. Page 7
Public Comparable Analysis
Trading Multiples & Operating Statistics
We have selected a group of publicly traded engineering and construction entities for this high-level analysis.
These public companies help act as a proxy for the industry and provide strong industry context.
LTM Operating Figures NTM Consensus Estimates Valuation
Market Enterprise Revenue EBITDA Revenue EBITDA NTM LTM
Company Capitalization Value Revenue Growth EBITDA Margin Growth Margin EV/EBITDA EV/EBITDA LTM EV/REV
Heavy Civil
EMCOR Group, Inc. $7,406 $7,056 $12,724 15.8% $1,074 8.4% (100.0%) N/A 8.3x 6.5x 0.6x
Primoris Services Corporation $1,585 $2,366 $4,426 0.2% $472 10.7% 7.1% 8.0% 6.4x 5.1x 0.5x
Construction Partners, Inc. $1,717 $2,042 $1,272 25.4% $134 10.5% 16.9% 11.3% 12.5x 15.5x 1.6x
Tutor Perini Corporation $689 $1,772 $5,874 (12.7%) $549 9.3% 0.3% 6.1% 5.1x 3.3x 0.3x
Granite Construction Incorporated $1,879 $1,633 $3,735 (2.2%) $181 4.8% 5.9% 7.6% 5.7x 8.5x 0.4x
Sterling Construction Company, Inc. $1,011 $1,515 $2,093 16.0% $223 10.7% 15.2% 10.5% 6.3x 7.2x 0.8x
Aecon Group Inc. $1,032 $1,279 $4,209 15.3% $161 3.8% 4.4% 6.2% 4.8x 7.5x 0.3x
Bird Construction Inc. $490 $453 $2,220 47.6% $122 5.5% 13.1% 4.5% 4.0x 3.7x 0.2x
Median $1,309 $1,703 $3,972 15.6% $202 8.9% 6.5% 7.6% 6.0x 6.9x 0.5x
Mean $1,976 $2,264 $4,569 13.2% $364 8.0% (4.6%) 7.8% 6.6x 7.2x 0.6x
Engineering
Jacobs Engineering Group Inc. $22,232 $26,509 $17,980 4.9% $2,176 12.1% 12.4% 9.5% 14.6x 13.5x 1.5x
WSP Global Inc. $19,564 $21,422 $10,279 16.8% $1,245 12.1% (16.1%) 17.1% 14.5x 17.2x 2.1x
AECOM $13,554 $16,110 $16,824 (0.2%) $1,373 8.2% 7.5% 6.5% 14.0x 11.9x 1.0x
KBR, Inc. $9,532 $11,745 $9,478 33.4% $1,087 11.5% (9.2%) 10.1% 14.5x 10.5x 1.3x
Stantec Inc. $6,986 $8,694 $3,636 (1.3%) $527 14.5% 19.5% 15.9% 12.6x 16.5x 2.4x
SNC-Lavalin Group Inc. $5,284 $6,857 $7,371 5.2% $479 6.5% 0.3% 9.2% 9.7x 14.3x 0.9x
Fluor Corporation $5,058 $3,971 $15,736 (12.2%) $528 3.4% 11.2% 3.2% 7.2x 7.6x 0.3x
NV5 Global, Inc. $2,571 $2,733 $894 7.2% $176 19.7% 12.6% 18.4% 15.3x 15.7x 3.1x
Willdan Group, Inc. $493 $626 $448 (9.5%) $23 5.2% 31.4% 9.1% 12.0x 27.3x 1.4x
Mistras Group, Inc. $244 $539 $855 16.7% $84 9.8% 8.2% 9.1% 6.3x 6.2x 0.6x
Median $6,135 $7,776 $8,425 5.0% $528 10.6% 9.7% 9.4% 13.3x 13.9x 1.3x
Mean $8,552 $9,921 $8,350 6.1% $770 10.3% 7.8% 10.8% 12.1x 14.1x 1.5x
Construction Engineering
Quanta Services, Inc. $23,445 $28,162 $16,426 15.9% $2,448 14.9% 26.6% 10.1% 13.8x 11.7x 1.7x
MasTec, Inc. $8,121 $10,520 $10,063 25.8% $1,876 18.6% 25.4% 9.6% 8.9x 5.7x 1.1x
Dycom Industries, Inc. $3,522 $4,242 $3,995 (2.1%) $378 9.5% 9.0% 9.8% 10.2x 11.5x 1.1x
MYR Group Inc. $1,991 $1,920 $3,174 9.5% $216 6.8% 14.0% 6.6% 8.6x 8.9x 0.6x
Argan, Inc. $796 $201 $648 29.9% $88 13.6% 11.8% 9.5% 2.4x 2.2x 0.3x
Median $3,522 $4,242 $3,995 15.9% $378 13.6% 14.0% 9.6% 8.9x 8.9x 1.1x
Mean $7,575 $9,009 $6,861 15.8% $1,001 12.7% 17.3% 9.1% 8.8x 8.0x 1.0x
Aggregate Supplier
Martin Marietta Materials, Inc. $29,982 $36,827 $6,658 19.5% $1,840 27.6% 21.5% 28.5% 16.7x 18.4x 5.8x
Vulcan Materials Company $30,455 $36,017 $7,521 23.6% $1,953 26.0% 22.1% 25.4% 16.3x 19.1x 5.2x
Eagle Materials Inc. $6,331 $7,401 $2,267 13.1% $783 34.5% 12.3% 35.4% 8.3x 9.6x 3.3x
Summit Materials, Inc. $4,604 $6,220 $3,049 3.3% $683 22.4% 0.5% 22.6% 9.1x 9.2x 2.1x
Median $18,156 $21,709 $4,854 16.3% $1,312 26.8% 16.9% 26.9% 12.7x 14.0x 4.3x
Mean $17,843 $21,616 $4,874 14.9% $1,315 27.6% 14.1% 28.0% 12.6x 14.1x 4.1x
Source: Capital IQ. Data as of March 31, 2022.
“LTM” refers to last twelve months. “NTM” refers to next twelve months. Page 8
About Us
MNP Corporate Finance (MNPCF) has a dedicated team of over 100 Recently Closed Deals
M&A and due diligence professionals across Canada. MNPCF
works with clients in virtually all industries as they prepare, plan (National)
and execute transactions.
Our typical transactions range in value between $3 million and
$300 million.
Local and International Reach
MNP is a participating firm within Praxity, a unique global alliance of
independent accounting/advisory firms created to answer global
business needs. As a member of Praxity, we are able to offer access
to corporate finance, accounting and tax advisory services
worldwide. We are also affiliated with Corporate Finance Cross
Border, which consists of 250+ M&A professionals in more than 30
countries.
Services
• Divestitures • Due Diligence
• Acquisitions • Transaction Advisory
• Debt Financing Services
Page 9
About Us
Deal Experience Recently Closed Deals
(National)
Since our inception, our team has advised on hundreds of
transactions, in a wide range of industries with diverse enterprise
values. In the past eight years alone we have completed over 200
transactions worth over $3.5 billion (not including due diligence
engagements).
Industry Experience
• Food & Beverage • Transportation
• Retail & Distribution • Construction
• Manufacturing • Software
• Agriculture • Financial Services
• Automotive • Technology
• Materials • Energy
• Health Care • Oilfield Services
• Pharmaceutical • Real Estate
Hands-on Approach
Current M&A transactions require a hands-on approach from start
to finish including the active engagement of senior resources. Our
senior resources are dedicated to our clients and are available as
necessary and appropriate. We keep our clients regularly informed
of the engagement status, issues we are encountering, successes
and overall progress.
Integrated Service Offering
We draw on the vast experience and deep specialist knowledge
network of our partners locally, nationally and internationally as
specialty issues arise, such as pre-transaction tax planning,
transaction structuring, estate planning, valuation, due diligence,
performance improvement and risk management.
Page 10Leadership Team
Transaction Leadership
Brett Franklin Aleem Bandali Mark Regehr Mike Reynolds
President Managing Director Managing Director Managing Director
Winnipeg Vancouver Edmonton Calgary
Brett.Franklin@mnp.ca Aleem.Bandali@mnp.ca Mark.Regehr@mnp.ca Mike.Reynolds@mnp.ca
204.336.6190 778.374.2140 780.969.1404 587.702.5909
Erik St-Hilaire Stephen Shaw Dan Porter Kevin Tremblay
Managing Director Managing Director Managing Director Managing Director
Winnipeg Toronto Toronto Toronto
Erik.St-Hilaire@mnp.ca Stephen.Shaw@mnp.ca Dan.Porter@mnp.ca Kevin.Tremblay@mnp.ca
204.336.6200 416.515.3883 416.515.3877 647.943.4051
Jon Edgett Patrick Khouzam Jonathan Banford Éric Grondin
Managing Director Managing Director Managing Director Managing Director
Waterloo Montreal Chicoutimi Sherbrooke
Jon.Edgett@mnp.ca Patrick.Khouzam@mnp.ca Jonathan.Banford@mnp.ca Éric.Grondin@mnp.ca
519.772.7460 514.228.7874 418.696.3924 819.823.3290
Due Diligence Leadership
Jean-Raymond Lafond Craig Maloney Johnny Earl John Caggianiello
Managing Director Managing Director Managing Director Managing Director
Drummondville Halifax Vancouver Toronto
Jean-Raymond.Lafond@mnp.ca Craig.Maloney@mnp.ca Johnny.Earl@mnp.ca John.Caggianiello@mnp.ca
819.473.7251 902.493.5430 604.637.1504 416.513.4177
MNPCF.ca
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